13.6 Fair Housing Enforcement in NJ: Mount Laurel Doctrine & Source of Income

The Mount Laurel Doctrine: Constitutional Affordable Housing

The Mount Laurel Doctrine represents one of the most consequential state constitutional jurisprudence developments in American land use law. Stemming from two historic New Jersey Supreme Court decisions—Southern Burlington County NAACP v. Township of Mount Laurel (119 N.J. Super. 164 [1972], affirmed 67 N.J. 151 [Mount Laurel I, 1975]) and 92 N.J. 158 (Mount Laurel II, 1983)—the doctrine established that municipal land use and zoning powers are derived from the sovereign police power of the state and must serve the general welfare of all New Jersey citizens.

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|                         THE MOUNT LAUREL CONSTITUTIONAL FRAMEWORK                       |
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|                                                                                         |
|   NEW JERSEY STATE CONSTITUTION (Article I, Paragraph 1 - General Welfare Clause)       |
|                                    |                                                    |
|                                    v                                                    |
|   MOUNT LAUREL I (1975): Every developing municipality must affirmatively provide      |
|   a realistic opportunity for its fair share of the present and prospective regional    |
|   low- and moderate-income housing need. Exclusionary zoning is unconstitutional.       |
|                                    |                                                    |
|                                    v                                                    |
|   MOUNT LAUREL II (1983): Judicial enforcement strengthened. Creation of specialized   |
|   Mount Laurel judges and the "Builder's Remedy" (developers can sue to bypass zoning   |
|   if they dedicate 20% of residential units to affordable housing).                     |
|                                    |                                                    |
|                                    v                                                    |
|   FAIR HOUSING ACT OF 1985 / COAH: Administrative oversight by Council on               |
|   Affordable Housing; later transitioned back to Superior Court judicial review.        |
|                                                                                         |
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Key Constitutional Mechanics

1. Prohibition of Exclusionary Zoning: Developing municipalities cannot use zoning ordinances (such as minimum lot sizes of multiple acres, bans on multi-family townhomes/apartments, or bedroom restrictions) to artificially inflate housing prices and wall off affluent communities from low- and moderate-income residents.
2. Affirmative Fair Share Obligation: Municipalities bear an affirmative constitutional duty to plan, zone, and create a realistic opportunity for their calculated "fair share" of the regional housing need for lower-income households.
3. The Builder's Remedy: Established in Mount Laurel II, a builder's remedy permits a real estate developer to initiate litigation against a non-compliant municipality. If the court determines the municipality's zoning is exclusionary and fails to satisfy its fair share obligations, the court will grant an order permitting the developer to construct high-density residential housing, provided the project reserves a mandatory percentage (typically 15% to 20%) for low- and moderate-income households.
4. Council on Affordable Housing (COAH): The New Jersey Legislature codified these principles in the New Jersey Fair Housing Act of 1985 (N.J.S.A. 52:27D-301 et seq.), creating COAH to evaluate municipal Housing Elements and Fair Share Plans. Following regulatory dormancy, the New Jersey Supreme Court in 2015 (In re Adoption of N.J.A.C. 5:96 & 5:97) transferred direct oversight back to designated Mount Laurel trial court judges.

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Lawful Source of Income Protections

Under the NJ LAD (N.J.S.A. 10:5-12(g)), source of lawful income is an explicitly protected class. A property owner, landlord, property manager, or real estate broker who refuses to lease or negotiate with an applicant because the applicant intends to pay all or part of the rent using government subsidies or third-party vouchers commits unlawful discrimination.

Covered Sources of Lawful Income

• Section 8 Housing Choice Vouchers (Federal HUD program);
• State Rental Assistance Program (SRAP) (New Jersey state-funded housing vouchers);
• Temporary Assistance for Needy Families (TANF) / WorkFirst NJ;
• Social Security Disability (SSDI) and Supplemental Security Income (SSI);
• Alimony, Child Support, and court-ordered maintenance payments;
• Emergency Rental Assistance and municipal housing subsidies.

The Income Multiplier Trap

A common deceptive practice among non-compliant landlords is the application of across-the-board minimum income requirements (e.g., "Applicant's gross monthly income must equal at least 3 times the monthly rent").

Critical New Jersey Rule: In New Jersey, applying a total-rent income multiplier to a voucher holder is illegal per se (Franklin Tower One, LLC v. N.M., 157 N.J. 602). A landlord may only apply an income ratio to the tenant's out-of-pocket co-pay portion of the rent, not to the entire contract rent.

Example: If a two-bedroom apartment rents for $2,400 per month, and a Section 8 voucher program subsidizes $2,000 per month, the tenant is personally responsible for $400. The landlord may only evaluate whether the tenant's income comfortably satisfies the $400 tenant portion. Demanding that the voucher holder earn three times the total $2,400 rent ($7,200/month) constitutes unlawful proxy discrimination under the NJ LAD.

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Prohibited Fair Housing Practices: Steering, Blockbusting, and Redlining

Licensees must maintain rigorous adherence to fair housing doctrines in all client communications and market conduct:

1. Steering (Channeling)

• Definition: The unlawful practice of directing prospective home buyers or renters toward or away from specific neighborhoods, census tracts, or condominium buildings based upon race, religion, national origin, familial status, or any protected class.
• Violative Actions: Licensees must never make comments such as, "This neighborhood is trending toward young professionals without children," or "You would feel much more comfortable in this section of town because there is a large Hispanic community here."
• Broker Protocol: Licensees must present listings strictly in alignment with the consumer's objective criteria (price range, number of bedrooms, architectural style, transit proximity) and refer consumers to public government resources for demographic, educational, or crime statistics.

2. Blockbusting (Panic Peddling)

• Definition: Inducing or attempting to induce property owners to sell or lease real estate by generating panic rumors that members of a protected class (e.g., racial, religious, or ethnic minorities) are moving into the neighborhood, implying that property values, school quality, or safety will plummet.
• Regulatory Penalty: Blockbusting is explicitly prohibited under N.J.S.A. 10:5-12(k) and N.J.A.C. 11:5-7.4. Engaging in panic peddling leads to immediate license revocation by the NJREC and severe civil damages.

3. Redlining

• Definition: The refusal by commercial banks, savings institutions, mortgage lenders, or insurance underwriters to issue mortgage loans or homeowner insurance policies in designated geographic neighborhoods based on the racial, ethnic, or socio-economic demographics of the area, rather than an objective credit appraisal of the individual applicant or physical structural appraisal of the collateral.

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Mandatory Disclosures and Office Display Requirements

To ensure transparency and public awareness, New Jersey statutes and NJREC administrative rules impose two mandatory administrative requirements on every operating brokerage firm:

Mandatory Display of the Fair Housing Poster

• Under N.J.A.C. 13:8-1.3 and federal HUD guidelines, every New Jersey real estate brokerage must prominently display the official Equal Housing Opportunity poster and New Jersey Division on Civil Rights Fair Housing Poster in every place of business where transactions are negotiated, including main offices and all branch offices.
• The poster must be positioned in a conspicuous, easily accessible location frequented by the general public (e.g., the primary reception lobby or client consultation conference room).
• Failure to display the poster constitutes prima facie evidence of discriminatory intent in the event a fair housing complaint is lodged against the brokerage.

The New Jersey Attorney General's Memorandum on Discrimination

• Pursuant to N.J.A.C. 11:5-6.4(j), whenever a New Jersey real estate licensee executes a listing agreement (exclusive right to sell, exclusive agency, or open listing) or an agreement to rent real property, the licensee must deliver a copy of the official New Jersey Attorney General's Memorandum on Discrimination to the property owner.
• The memorandum notifies the property owner that it is unlawful to discriminate against any buyer, tenant, or applicant based on any protected category under the NJ LAD.
• If a property owner explicitly states that they will not sell or lease their property to members of a protected class, or refuses to acknowledge the Attorney General's memorandum, the licensee must decline the listing immediately and refuse to represent the owner.